Don’t be fooled: Middle-class earners and small business owners are the real job creators

In 1914, a pinko commie socialist class warfarist named Henry Ford went out of his way to acknowledge what every society has known deep down since humans first left the primal hunter-gatherer lifestyle behind and started doing specialized tasks for their friends and neighbors – too much income inequality among a given population is a bad thing.

Ford knew instinctively that it doesn’t matter how industrious and innovative you are if people are too poor to buy your stuff, so he doubled the wages he paid his factory workers, reasoning that he wanted his employees to be able to actually afford the cars he was producing.

Now, Ford didn’t need to do what he did. He could have gone the other way, trying his best to spark a race to the bottom in wages instead a race to the top, thereby becoming the toast of robber barons everywhere and whatever the 1914 equivalent of Rush Limbaugh was. (For some reason, I’m picturing a very rotund man wearing a full-length coat made out of about 87 baby minks and speeding down the highway in a canary yellow Stutz Bearcat with a minimum of three adorable street urchins caught in the grill like dragonflies on a weekend trip to Door County.)

Now, Fox News would no doubt like you to believe that no one ever worried about income inequality until that wild-eyed Kenyan socialist entered the White House and started crushing the spirits of the Walton family. Indeed, “class warfare” (i.e., worrying about the growing divide between the haves and have-nots) and “job creator” have become omnipresent buzzwords during the Republican presidential primary season.

But the truth is, there’s a long, honorable tradition in this country of rigging the system to create a more favorable outcome for the middle class. In fact, income redistribution has been baked into the tax system for decades. And as I’ve argued before, history simply doesn’t support the idea that higher taxes on the very rich would destroy the economy. If anything, the opposite is true. For example, if you take a quick glance at this chart, you’ll see that a relatively low top marginal tax rate preceded the Great Depression, while a very high top marginal rate coincided with the post-war boom of the ‘50s and ‘60s.

But who really needs charts? The idea that a healthy, engaged, and psychologically intact middle class is vital to a country’s economic fortunes is simply common sense. Indeed, unless you want an economy built on teacup poodle tiaras and filigreed elk skin falconer’s gauntlets, a little income redistribution is healthy.

And that’s not just stock liberal blather. No, it’s actually supported by a recent study from the pinko commie socialist class warfarist International Monetary Fund.

The study found that among a range of factors affecting the length of a country’s growth periods, income distribution (namely, greater income equality) was the most important. It was found to be far more important than factors such as external debt, foreign direct investment, and exchange rate competitiveness. According to the study’s authors, “a 10 percentile decrease in inequality (represented by a change in the Gini coefficient from 40 to 37) increases the expected length of a growth spell by 50%.”

Indeed, say the authors, there are plenty of reasons to take a closer look at the increasing inequality we’ve tolerated over the last few decades:

“[T]aking a historical perspective, the increase in U.S. income inequality in recent decades is strikingly similar to the increase that occurred in the 1920s. In both cases, there was a boom in the financial sector, poor people borrowed a lot, and a huge financial crisis ensued ….

“The recent global economic crisis, with its roots in U.S. financial markets, may have resulted, in part at least, from the increase in inequality. With inequality growing in the United States and other important economies, the relationship between inequality and growth takes on more significance.”

So as the rhetoric heats up during this year’s presidential campaign, don’t be fooled. The real job creators live next door to us. They run small businesses, work in jobs that make them anything but rich, and keep the economy’s engines fueled up and firing. And as it has throughout history, rising income inequality threatens to stall that engine.

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